Jan. 31: The guts of credit... cost, CFPB, RESBOG, MBA involvement; CFPB exams to drop; Thoughts on world standing; California MBA & wildfires

“Six out of seven dwarves are not Happy.” Much of life is based on probability, and/or a gamble. For example, I can’t believe that I put my entire 401(k) into bitcoin last summer. Bitcoin has since plummeted… I thought that the only thing it could do is go up! Looks like I’ll be working til I’m 90. But back to the topic. Casino owners make a fortune off of people who are convinced that they’re going to win… but we all know that the dollars don’t always work that way. Las Vegas, home of the MBA’s Annual Conference last year, saw its fewest visitors in four years during 2025, and Strip gaming revenue rose less than 1 percent, according to statistics released this week that give a picture of a full calendar year. Gaming and tourism had a year beset by political turmoil, economic upheaval locally and nationally, a 43-day government shutdown, and a steep decline in international visitation brought on by boycotts of travel to the U.S. by Canadians. So yes, politics and the economy do impact much of life, including psychologically, and lenders have a ringside seat to it all.

Credit theory primer

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Simply put, credit scores would not exist without the data that's in credit reports, and at their core, Experian, Equifax, and Transunion are data and technology companies that produce information that makes mortgage and other lending decisions possible. Any other questions?

Continuing on, credit scores are the output of applying the credit data to an algorithm and represent a “moment in time” assessment of credit worthiness based entirely on the information available at that point in time. The Bureaus are tasked with producing that data, and the integrity, security, and accuracy of that data is critical not only to credit but also to individuals.

Everybody's talking about both the mechanics and theory of credit reports and credit scoring. Most see the adoption of more modern credit scores as a huge opportunity. For example, making rent payments. Historically, paying rent on time, which is a really strong indicator of readiness for home ownership, wasn't consistently reflected in mortgage credit decisions. There are a lot of reasons for that, but one of them is it wasn't included in the scores that were used. That's changing: Vantage 4.0 incorporates alternative data like rental payments, and that better reflects how consumers manage their everyday obligations, their financial obligations we've long believed in the power of positive rent reporting.

Costs have risen markedly. National credit bureaus don't set the price of tri-merge credit reports. Those costs are determined by a lot of different parties, including score algorithm providers, and tri-merge resellers, who pull all of the information together across all three bureaus, and they contract directly with lenders. There are loan origination and technology systems that have fees for processing transactions. In October of 2025, effective January 1 of 2026, FICO increased its royalty fee for its score algorithm from $4.95 to $10 per borrower, doubling the cost of that score within a tri merge report, and in a tri merge report that means you have to multiply that by three per borrower on the loan.

The credit bureaus operate under very rigorous regulatory oversight because the accuracy, the security, and the fairness of the data that they oversee is, arguably, essential to the stability of the US financial system. So, they will say that the pricing reflects that responsibility and that investment that comes with that role.

No one is arguing that our systems don’t need to catch up to the way people actually live and manage money today. This industry has relied on a single way to measure credit worthiness, blending it down to a three-digit number, and now we've got better data, better tools, and better predictive models. Why not use them?

But it isn’t so simple and credit issues’ temperature rises

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Dan Sugg, CMB 2026 RESBOG Chair and Chief Mortgage Lending Officer at Michigan First Credit Union, has some thoughts on credit bureau pricing models, data gaps, and the urgent need for reform.

“Rob, I appreciate the opportunity to highlight the MBA’s Residential Board of Governors’ (RESBOG, of which I am the current Chair) efforts to bring transparency and solutions to the challenges surrounding consumer credit risk assessment. This issue has been simmering since October 2022, when the FHFA initiated the ‘tri-merge to bi-merge’ conversation at the MBA Annual in Nashville. The intent was to reduce costs for consumers, but the failure to deliver on any meaningful changes means that the reality has been the opposite.

“Since then, the cost of a single borrower’s tri-merged credit report has tripled… or more. Each year, credit expenses continue to rise. And that’s just the baseline: rescores to add missing data, ‘what-if’ scenario engines, and tradeline updates all come at additional cost. It is not uncommon for borrowers to pay $300 for a complete credit risk profile. Add debt monitoring, and the burden grows heavier still.

“There’s a business model challenge. Traditionally, our industry has absorbed the upfront cost of credit reports, only charging consumers if a loan closes. With pull-through rates hovering around 30–35 percent from initial credit pull to successful closing, this leaves lenders carrying significant expense.

“Some argue this is a lender problem, and that lenders should simply pass the cost of credit reports directly to applicants at the time of application, rather than subsidizing the majority who never close or close elsewhere. While this approach might mitigate slightly lenders’ cost concerns, it is still a raw deal for consumers, requiring them to pay up front for credit reports on pre-approvals and paying at the application phase even if the borrower ends up not qualifying. It also completely sidesteps the larger issue: requiring credit reports from each of three providers gives the credit bureaus monopoly pricing power, which they have clearly chosen to exploit to the tune of 300 percent price hikes over the past few years.

“I haven’t found anyone that thinks this isn’t an issue, I’m also hard pressed to find anyone that has a solution to this or anyone that thinks this torrent rise in costs will end naturally. Tri-merged reports are required to deliver a loan to the GSEs, so what alternative does a lender or consumer have? Zero, in my opinion, due to the GSE created oligopoly: a state of no competition, in which a market is shared by a small number of producers or sellers who are each guaranteed 100% market share. This lack of competition leads directly to the price-gouging we are seeing today in the credit reporting and scoring space.

“Our industry is making efforts. The Mortgage Bankers Association has maintained a credit score working group since Sandra Thompson’s 2022 announcement, with hundreds of volunteers from member companies exploring solutions. RESBOG, about a year ago, overwhelmingly voted to examine options to replace the tri-merge mandate and formed a working group to examine the feasibility of a single credit score. The committee members, representing every member category, have looked closely at their own data and debated the scenarios now surfacing in public forums. This fall, RESBOG approved the working group’s recommendation to direct MBA to advocate to FHFA that the GSEs allow lenders to submit just one score for borrowers with an initial score over 700. Importantly, this would not be a mandate. Lenders would still be able to submit a tri-merge if they so choose.

“There is a call for change! The definition of insanity is doing the same thing over and over and expecting a different result. Complaining about credit report price hikes without offering a solution isn’t working, and it’s time to fix the root cause.

“This conversation must continue, not through argument or provocation, but through collective leverage. The mandate for tri-merged reports lies squarely with FHFA and the GSEs. They have the power to create responsible competition between credit reporting agencies. No one is proposing additional risk that cannot be managed through an appropriate score cutoff and simple business rules. The goal is fairness, transparency, and affordability in consumer credit reporting. Period. End of story.” Thank you, Dan!

MBA President and CEO Bob Broeksmit, CMB, sent out a new blog post that doubles down on why it’s time for competition for credit scores and credit reports, and picks apart the flimsy arguments put forth recently by the Consumer Data Industry Association.

National Consumer Law Center’s Stephen Rouzer writes, “The Consumer Financial Protection Bureau (CFPB), led by Trump appointee and Project 2025 architect Russell Vought, started the process of potentially changing the Bureau’s complaint system to make it harder for people to file complaints against credit reporting companies, and possibly against debt collectors, banks, and other big businesses. The CFPB appears to be responding to a request by Consumer Data Industry Association (CDIA) to reduce the number of complaints people file with the CFPB against the three key members of the trade association, Experian, Equifax and TransUnion, which together are known as the Big Three.  

“The January 27 CDIA letter to CFPB asks the Bureau to: (1) require consumers to supply sensitive personal information, such as date of birth and other demographic information; (2) require two-factor authentication and only allow a certain number of complaints per phone number, effectively restricting how many complaints a consumer can file; and (3) restrict IP addresses from submitting complaints on behalf of multiple consumers, which could hinder consumers from submitting complaints from places such as libraries and domestic violence shelters.”

Did someone say “CFPB”?

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Bloomberg reports that, “Consumer Financial Protection Bureau examiners sidelined by the Trump administration will be back on the job as early as April, but the number of exams they conduct and the scope of their supervision will be cut back dramatically.

“CFPB supervisors will begin developing the scope of their exams next week, setting the stage to review companies’ books and records starting in the second quarter, top agency officials said at a Thursday virtual meeting with examiners, according to multiple people familiar with the situation who requested anonymity to discuss internal deliberations.

“The CFPB is expected to carry out fewer than 70 exams over the course of 2026, a steep drop from the past. The agency oversees banks, financial technology companies, debt collectors, consumer credit reporting companies, and others. “The CFPB averaged more than 600 “supervisory events” a year from fiscal 2020 through 2024, according to its most recent performance report.

“And all exams will be conducted virtually, rather than having examination teams travel to review company records and speak with employees in person, the people said. That’s a stark change from previous agency practice.”

Stay tuned!

The U.S., politics, lending, and world standing

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Two Saturdays ago this Commentary had a letter by Robert Rubin expressing his thoughts on the “free speech health” of business leaders during the current Administration.

Rubin’s opinions prompted George Charles to send his thoughts over, dissecting Rubin’s opinions. This, in turn, prompted another to provide a different perspective.

“Mr. Charles clearly has a very different assessment of the Trump administration than does Mr. Rubin. Differing viewpoints shared without vitriol are very healthy and demonstrate well the adage that we can ‘disagree without being disagreeable.’ Kudos for sharing each viewpoint.

“One point, however, I don’t think anyone can seriously argue is that America’s overall standing in the world has been damaged by multiple ill-advised, and preventable feuds with our own allies caused by President Trump and his approach to international affairs and trade. I am certainly pleased that a U.S. military invasion to seize territory from a friendly nation and NATO ally is apparently off the table, but the fact it was ever on the table in the first place, even if only as a negotiating tactic, demonstrates the recklessness of this president and his disregard for international norms and standards. Some used to describe America as a “shining city on a hill,” an example to the world.

“What kind of example are we now? We all know bullying is wrong. Yet, at this moment a bully is what America is on the world stage. We threaten, even our friends, with horrible consequences to their lives and economies unless they acquiesce to President Trump’s demands. Americans should be embarrassed. The president may believe he is advancing American interests, but his actions have shattered the respect and admiration many in the rest of the world once held for America. Ironically, we are witnessing the dismantling of what actually made America great.” Thank you.

The California MBA’s efforts continue

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With so much lending activity in California, it is good to know what the California MBA has its eyes on, legislatively, since other states pay attention. I asked California MBA CEO Paul Gigliotti, “Has the State addressed wildfire damage and possibilities? What about forebearance, recovery, and rebuilding… What is the California MBA watching?”

Paul wrote, “This deals indirectly with AB238. I am sure that your readers recall that a year ago, California experienced devastating wildfires in Los Angeles County that displaced families and left thousands of property owners facing enormous uncertainty. In the immediate aftermath, mortgage bankers stepped up, working quickly with state leaders to ensure borrowers had access to meaningful forbearance options while they focused on safety and recovery.

“That collaborative approach continues today, and it’s evolving as the needs of wildfire survivors change from short-term relief to long-term rebuilding. Following the fires, the Legislature passed AB 238, a bill that specifically addressed wildfire-related hardship. The law allows eligible borrowers to receive mortgage forbearance for up to 12 months from the date of request, providing breathing room for property owners as they navigate insurance claims, displacement, and rebuilding decisions.

“California MBA worked closely with lawmakers and regulators to help shape that forbearance policy so it could be implemented responsibly, balancing borrower relief with clear servicing standards for lenders.

“More recently, Governor Newsom announced additional commitments from banks to provide extended forbearance options for approved borrowers who still need assistance beyond the initial period. Lenders are actively working to streamline the process for requesting additional forbearance periods, recognizing that rebuilding timelines often extend longer than anyone expects. Working with the Governor’s office, California MBA has gathered data on damaged properties in areas like Eaton and Pacific Palisades, including lien status and permitting activity, to better understand where the financing barriers truly are.

“We’ve also identified lenders willing to explore pilot construction loan products, paired with continued mortgage assistance on the first-position lien. In some cases, there may be a role for state support designed to help bridge the gap between insurance proceeds and rebuilding costs when loan-to-value risk is the primary obstacle.

“Another concept under discussion is the creation of an online portal that could help connect borrowers facing rebuild financing challenges with their mortgage servicer, a potential construction lender, and available state support options. The goal is to reduce friction, improve coordination, and help eligible owners move from delay to reconstruction.”

Paul’s note finished with, “California’s mortgage bankers are committed to being part of the solution, not just through forbearance, but by helping design lending products and programs that support recovery and rebuilding. California MBA will continue collaborating with state leaders, lenders, and servicers to ensure wildfire survivors have a realistic path forward to long-term recovery.” Thank you, Paul.

Dentist: “Little Johnny, you’re not brushing your teeth very well. Do you know what comes after decay?”

Little Johnny: “De ‘L’?”

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